The AI capex boom is creating a compelling fixed income opportunity, as leading tech firms increasingly fund investments through sizeable AI‑linked bond issuance, offering investors an alternative way to gain AI exposure beyond equities.
The AI investment boom is likely to continue as enterprise adoption broadens. However, it will be important for investors to assess developments quarter by quarter rather than focusing solely on long-term aspirations. Given the current euphoria around AI, there are likely to be pockets of weakness along the way. AI has transformative potential, but ultimately it must prove to be value‑adding for enterprises in order to justify the current level of investment.
- Historically, most capex has been internally funded. Technology companies have largely financed capital expenditures from free cash flow. However, the fourth quarter of 2025 marked an inflection point, as companies turned to increased debt issuance to fund capex. This trend is likely to continue, with issuance remaining elevated for the next several years.
- Recently, massive offerings of AI‑related debt have come to market. Roughly 93 US billion dollars, or more than 5 percent of investment‑grade debt issuance in 2025—nearly triple the sector’s average annual issuance of 32 US billion dollars between 2015 and 2024, according to Bank of America. The borrowers are a “who’s who” of hyperscalers, such as Meta, Alphabet and Oracle, looking to build out data centers while seeking to secure captive energy sources to keep them running. There is also potential for more US companies (Oracle) to issue in euros.\
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